US funds lose $46bn as nervous nellies quit

Investors in US stock mutual funds withdrew $US27.1 billion ($46 billion) more than they added last year, the worst outflow since 1988, the Investment Company Institute said.

Stock funds ended the year with $US2.67 trillion of assets, a 22 per cent drop from 2001, said ICI, the fund industry group based in Washington.

More than 96 per cent of the decline resulted from falling share prices. Investors fled stock funds as the market dropped for the third straight year, the longest losing streak since the Great Depression. The outflow represented 0.9 per cent of the average amount invested in stock funds during the year.

Bond funds had their best year ever, the ICI said. They gained $US140.5 billion, exceeding the $US103 billion inflow in 1986, it said. The funds ended the year with total assets of $US1.12 trillion. The Lehman Brothers US Aggregate Bond Index, a measure of the performance of the entire US market, gained 10.3 per cent in 2002.

The best-selling fund of the year was Pimco Advisors' Total Return Fund, managed by Bill Gross. The $US69.8 billion bond fund pulled in $US14.5 billion in net new investments, according to Financial Research Corp. Pimco, a unit of Allianz AG, was the third best-selling fund family overall adding $US27.4 billion, with more than 90 per cent going to its bond funds.");document.write("

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Two firms did have success selling stock funds, FRC said. Vanguard Group, the second-largest fund company, was also the second-best in total sales adding $US38.1 billion, including $US11.1 billion for stock funds. American Funds was the best-selling family overall, adding $US38.8 billion, with three-quarters going into stock funds.

Putnam Investments, a unit of Marsh & McLennan, and Janus Capital Group had the worst-selling stock and bond funds among the 25 largest fund companies, according to Financial Research Group. Investors withdrew $US14.2 billion more than they added.

Meanwhile Templeton Asset Management and two of its Asia portfolios are suing the Harvard University endowment, alleging that its investment managers have broken federal securities laws in their bid to force the funds to liquidate, the Boston Globe reports.

In a suit filed in federal court in Maryland, Templeton said that Harvard Management, which runs the $US18 billion endowment, failed to disclose on a timely basis its position as the largest shareholder of the Templeton China World fund and the Templeton Dragon fund. Both are closed-end funds, which trade on the New York Stock Exchange.